UniCredit's bid for BPM also throws a spanner in the works for Italy's government, which had advanced plans for a merger of BPM with rival Monte dei Paschi di Siena which it saw as strengthening its banking sector without harming competition.

The Italian lender rejected the surprise offer from its larger rival, saying it undervalues the business and creates uncertainty.

UniCredit SpA has hired Deloitte LLP to advise Italy’s second-biggest bank on its takeover bid for Banco BPM SpA, people familiar with the matter said.